Most of the long-time posters here are probably familiar with various studies of variable withdrawal rates in retirement. For any of you who haven't seen those studies here's an Excel file that demonstrates the extra margin of safety that allowing some portion of your annual withdrawal to float based on portfolio performance:
http://gnobility.com/Finance/SWR_using_Variable_Withdrawals.xls
Set up an old-school 30 or 40 year retirement using a basic S&P 500 - Bond split, then use the little arrow keys at cell E19 to dial up ever larger "percentage of portfolio" draws, and watch the impact that it has on the Total SWR.
Allowing 0.50% to 1.00% of your annual draw to vary based on portfolio size provides a fair amount of cushion, and wouldn't be all that painful in practice - you just defer auto replacements, more lavish vacations, and remodeling projects until your portfolio recovers.
Cb
PS: this app's results are within a few tenths of the SWR's provided by FIREcalc. You can model the same thing in FIREcalc using SG's trick of cranking the FIREcalc's Portfolio Expense Ratio input block up (you must add to whatever ER your portfolio will have...i./e. ~0.22% ER + 0.75% Percent of Port)
http://gnobility.com/Finance/SWR_using_Variable_Withdrawals.xls
Set up an old-school 30 or 40 year retirement using a basic S&P 500 - Bond split, then use the little arrow keys at cell E19 to dial up ever larger "percentage of portfolio" draws, and watch the impact that it has on the Total SWR.
Allowing 0.50% to 1.00% of your annual draw to vary based on portfolio size provides a fair amount of cushion, and wouldn't be all that painful in practice - you just defer auto replacements, more lavish vacations, and remodeling projects until your portfolio recovers.
Cb
PS: this app's results are within a few tenths of the SWR's provided by FIREcalc. You can model the same thing in FIREcalc using SG's trick of cranking the FIREcalc's Portfolio Expense Ratio input block up (you must add to whatever ER your portfolio will have...i./e. ~0.22% ER + 0.75% Percent of Port)